China Properties Group Ltd. is marketing U.S. dollar-denominated bonds as borrowing costs for high-yield corporates in Asia near the lowest since July.
The company, which develops residential and commercial properties in mainland China, is offering five-year notes to yield about the high 13 percent area, a person familiar with the matter said today. Yields on non-investment grade issues in Asia fell to 7.65 percent on Oct. 7, close to a seven-week low of 7.60 percent reached on Sept. 19, JPMorgan Chase & Co. indexes show.
JPMorgan, the largest underwriter of corporate bonds globally since Dec. 31, lifted its 2013 forecast for sales of junk debt including leveraged loans to $1 trillion, according to strategists led by Peter Acciavatti in New York, as investors signal confidence the U.S. won’t default on its debt. With gross domestic product growth stymied and Congress paralyzed by political wrangling over President Barack Obama’s health-care law, the Federal Reserve may delay tapering, fund managers including Sage Advisory Services Ltd. and Deutsche Bank AG’s Private Wealth Management unit in New York have said.
“There’s a definite improvement in sentiment for primary issuance post the Fed not tapering,” Shankar Narayanaswamy, the Singapore-based head for credit strategy at Standard Chartered Plc, said in a phone interview today. “However issuance is likely to be muted in the near-term given the continuing stand-off in the U.S. on the increase to the debt ceiling. If I take a two- or three-month view, markets will remain conducive for new issuance, including high-yield.”
China Properties’ sale ends more than a week of zero issuance for speculative borrowers in Asia outside Japan, according to data compiled by Bloomberg. China Properties, rated B- by Standard & Poor’s, the rating company’s sixth-lowest non-investment grade, was considering a sale of dollar notes back in May and met with investors in Hong Kong and Singapore at the end of that month.
China Overseas Land & Investment Ltd., another developer, hired banks to arrange fixed-income investor meetings from tomorrow, a separate person familiar with that matter said today. It’s rated BBB+ by S&P, the risk assessor’s third-lowest investment grade.
Kookmin Bank, a unit of South Korea’s largest lending group, yesterday sold $500 million of three-year bonds priced at a spread 125 basis points more than the three-month London interbank offered rate, according to data compiled by Bloomberg.
The sale received about $3 billion of orders from some 150 accounts, a person familiar with the matter said today. Asian investors bought 59 percent of the deal, while 21 percent went to Europe and the rest to the U.S. Kookmin is rated A by S&P.
Credit risk in Asia rose today. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 1 basis point to 149 basis points as of 7:59 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its second consecutive daily increase after four days of declines, according to data provider CMA.
The Markit iTraxx Australia index advanced 1 basis point to 121 as of 11:09 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is on course for its highest close since Oct. 2, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index rose 1 basis point to 96.25 basis points as of 8:57 a.m. in Tokyo, Citigroup Inc. prices show. The measure is on track for its highest close since Sept. 30, according to CMA.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.
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